Here’s what’s happening.
Taxes and your paycheck…
As you know, Congress and President Obama successfully negotiated the extension of the Bush-era Tax Cuts for 2011 and 2012.
There are three main components of the 2010 Tax Relief Act; (1) a continuation of 2010’s income tax withholding tables, (2) a reduction in the Social Security payroll tax for employees from 6.2% to 4.2% for 2011 and, (3) the termination of the Making Work Pay Credit that expired on 12/31/2010. (Please note that the employers’ portion of matching Social Security payroll tax is still 6.2%)
What does this mean for your paycheck?
While the Federal tax tables have remained unchanged you may see a slight increase in the Federal income tax withheld because the Making Work Pay Credit has expired. As an employee you will also see a reduction in the amount of Social Security tax withheld.
